The Meritocracy Dilemma
It's not confusing to most folks, but it bothers me a lot.
The conventional wisdom is that we've got the best of all worlds–freedom
to innovate and be a winner, in a free-market orgy of talent and capital
and consumers. The only problem with the dance is that it's so hard to find
anybody that's actually made it work for them. Even those who seem to have
it made will–with little prompting–spill out a tangled web of possessions
and obligations and stresses that are suffocating them. And for most of the
few who have made it without an ulcer or a coronary, there's
been
a lot
of history that they don't want their kids at boarding school to know much
about.
Managerial Capitalism - the Rule of Meritocracy
Free-market capitalism
is neither aristocracy or democracy. Its special "ocracy" is meritocracy
– those who are most able rise to the top of the pecking orders
of multi-national corporations and their management teams, not determined
by any static
biases of family, ethnicity, national origin or even gender.
But the
lack of those perceptible biases doesn't mean there's a lack of bias.
The bias is for a special blend of intelligence and energy called merit.
Most
of the significant wealth is managed by corporations which need a steady
supply of hungry young tigers with big brains and bigger egos to attack
markets and destroy competition and launch killer products to conquer
market segments. It sounds as brutal as feudalism. The expendable foot soldiers
of these campaigns are people from the same social classes as those who
rise to the top. The difference may be in their genes–their hearts
don't seem to be in the unending fight–and at some level they know
they're expendable as soon as a wave of re-engineering or acquisition dictates.
There's been a steady increase in the level of commitment, intelligence,
energy, ambition and ruthlessness required to rise to the top of any
corporation,
so the few who make it are reaping greater rewards compared to the people
who fight in the trenches. And that's why they're in the game.
Money,
not nobility, is the only way to differentiate oneself from the run-of-the-mill.
The stock market wealth engine has reduced the process
to a formula: Own stock or options in a company; build the company
(perhaps from scratch); buy another company or be bought out; own stock and
be
perceived as instrumental in building the new organization; buy another
company or be bought out... That process builds the winner's web of
wealth. Stock is never given out of generosity, so folks who don't negotiate
hard have a more constrained web of wealth. If they are downsized,
they
are separated from their web of wealth, perhaps before they have any
significant bit of other people's productivity.
Meritocracy's profound, counter-genetic shift
Historically,
those chieftains who were woven into a web of wealth maintained a
web of support for the many whose productivity they laid claim to. In our
time, technology means that more productivity does not mean more workers.
The genetically based contract - that the powerful protect the weak
in exchange
for their productivity - has broken down. It would never occur to
a
king or noble (or silver-backed gorilla) to estrange a loyal and
hard working
serf simply because there were harder-working serfs. This all changed
with the pervasive application of the Net Present Value calculation.
With no alternative in sight and general agreement that capitalism
won the battle of the isms, no one seems to see any alternative but
to keep
carrying a heavier load each year, like the farmer carrying a calf
around each day until he falls under an unsupportable load of bull.
Perhaps this is not the final system. Perhaps there's life after
meritocracy, especially when one observes that the products and services
produced
by the
meritocrats are not always satisfactory. Just because these hard-charging
companies are defeating each other in the market doesn't mean they're
winning
customers' hearts and minds. There's something about large organizations
which squanders most of the participants' time and energy in producing
motion rather
than progress. Too often, they seem as competitive with customers
as they are with competitors, designing byzantine structures to lock
a
customer into
a complex dependency when all the customer wanted to do was surf
the net or call home.
Some day we may discover that our suspicions were correct, that, during
the years surrounding the beginning of the third millennium, only 10% of
our efforts were producing value but we were going crazy with the cultural
and economic myths surrounding that 10% of our effort. All it took was to
change the work protocols slightly and people once again were able to turn
most of
that wasted 90% into a real life.
I believe that Xpertweb provides those protocols, but we shall
see.
The Tyranny of Net Present Value
All capitalism is based on a single strategic algorithm: calculating the Net Present Value (NPV) of a series of expected cash flows by discounting each cash flow (cf) by a percentage (discountRate) over time:
NPV=cf1*(1-1*discountRate)+cf2*(1-2*discountRate)+...cfn*(1-n*discountRate)
Why would this dry formula be so important to every one
of us?
The NPV calculation lies at the center of all resource
allocation decisions
You may resent it, but all your economic possibilities are
defined and constrained by this simple calculation buried in the
computers of people you will never meet. It is what they are talking
about when people
say "Follow the money."
The greatest civilization in the history of civilization
has been reduced to this single formula. If in the beginning
was the Word, then in the end there's only the Net Present Value
formula. With
it, managers and financiers and governments and pension plans compare
any set of cash flows to any other set. Then they sell the lower
one and purchase
the higher one. Even though it ignores the sweep and drama of the
rise of civilization, it's a democratic yardstick. It's also the
basis of meritocracy.
It is the process of "capitalizing"
every cash flow, whether it's an inflow (customer payments and collections,
bond yields, corporate earnings) or an outflow (employee salaries and benefits,
supplier payables, social security payments). Corporate managements have
an uneven track record in growing their revenues but they are masters at
reducing
their expenses and making optimistic forward-looking statements. A company's
stock market valuation is some multiple of forecast earnings. To increase
the
value of the shareholders' (i.e., management's) stock holdings and options,
the best strategy is to reduce expenses, which appears to instantly increase
earnings. As available capital exploded in the 20th century, every discernible
cash flow opportunity in the economy showed up on someone's radar screen
and
was targeted for assimilation or annihilation, whether it's mom & pop
retail sales in rural Arkansas (a Wal-Mart opportunity) or a 48 year-old
engineer
at
Chevrolet (a GM expense).
The logic of meritocracy says
that an engineer may be a star at 27 but a liability at 48. This
is the basis of the pervasive, subconscious grievance against meritocracy,
even when it's not framed in those terms. The conventional wisdom of the
age is that
everyone needs to re-train themselves on a moment's notice to become a software
programmer or help line staffer or home health care specialist.
The question is,
what is the obligation of an economy to consider and support the preferences
of the majority
of its participants? Naturally, the "moving hand" school of thought
is that the market economy is driving all these choices, and complaining about
it is unreasonable, as G.B. Shaw pointed out. Even if individuals can adapt
as quickly as proposed and remain employable, they are repeatedly separated
from their last company's web of support and their only opportunity for a web
of wealth–often, it's obvious, by intention.
I have no answers for the meritocracy dilemma, but it's obvious
we have an economy that freezes out most of its participants. The resentment's
not boiling, but it's building. That inequality has been embraced and
extended by most decision makers in our government, and they seem to think
it can go on forever without repercussions.
We shall see.
12:16:59 AM 
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